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tv   Nightly Business Report  PBS  August 19, 2010 12:00am-12:30am PST

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>> susie: g.m. revs up for wall street, filing its much- anticipated initial public offering. >> now comes the hard part, which is doing all of the analysis to see whether or not this is truly a deal for everyone. >> tom: from bankruptcy back to wall street in just over a year, we look at the automaker's quick road to recovery. you're watching "nightly business report" for wednesday, august 18. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
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this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> susie: good evening everyone. general motors will soon be a public company again.
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tom, late this afternoon the automaker filed papers with the securities and exchange commission for an initial public offering. the i.p.o. is expected to be one the biggest ever in corporate history. >> tom: susie, some of the money g.m. raises will pay back american taxpayers, who bailed out the company just one year ago. many of the details are still unknown, but here's what we can tell you about the landmark i.p.o.: g.m. will be offering 500 million shares to the public sometime between october and december. the stock will be traded on the new york stock exchange and the toronto stock exchange. the automaker will trade under its old ticker symbol, g-m. the company will not pay dividends. and the government will sell 20% of its holdings. the u-s treasury is g.m.'s biggest owner with 300 million shares. >> susie: so will investors buy the new g.m.? i.p.o. expert david menlow is counting on it. >> we believe that this offering is going to be an unqualified
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success. there is going to be a tremendous amount of pressure in all the right places to make this deal work, and it is going to be a stock that, by the way, is going to have to be bought by many of the institutions because it will be involved in almost every index that's out there. so there's an additional component that will drive additional sales into this stock. >> susie: joining us now with more analysis, diane eastabrook, our midwest bureau chief, live from the c.m.e. group in chicago. >> hi, diane, a big day for g.m. >> a big day for g.m. >> susie: you heard david menlow, and he is very positive on this i.p.o. and the stock offering. i know you've been talking to a lot of analysts. what are they telling you? how well-received will this i.p.o. be? >> g.m. is a household name. it is doing much better than it was doing before it went into bankruptcy.
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it is building better product, it has paired its costs. it is doing better in emerging markets like china. but i think you have to keep in mind that the economy is still somewhat weak, and some would say very weak, and this is a company that has had a revolving door of c.e.o.s, four in just the past year. so i'm not sure how that will play with main street investors. >> susie: there certainly are a lot of issues, and even general motors listed in its offering memorandum there are risks. tell us about the risks they identified. >> right. there was a whole laundry list of risks, among them, sales volumes. going into the year, we were looking at 11.8 million units sold here in the u.s. a lot of companies have paired that back. j.d. power have paired it back to 11.5 million. credit markets are still tight. negative consumer perception, which comes at
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years of what is perceived as being poor quality products and more recently being government-owned. and labor costs, they'll be negotiating a new contract with the u.a.w. next year and cash and liquidity problems. so going forward, they're banking on building products with into engine technology and contents, and the company needs the cash to be able to build and sell those products. >> susie: bottom line from what you've been hearing and what you've been reporting, how important is this i.p.o. for g.m.? >> i think it is very important. this company has been living under the burden for the last year of being government mother -- government motors. it is a real turnoff for a lot of consumers. a lot of people have gone to ford and another companies. i think they need to get out from underneath that burden to be viable among a lot of consumers going forward. >> susie: how long is it going to be, do you think, before the government is out of the picture? they said they're going to sell about 20% of their
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shares in g.m., but they still have a big chunk left over. they're the biggest shareholder. >> they do. i think it could take some time, and i think that is something we'll be looking for down the line. i think it could took several more months. >> susie: i know american taxpayers will be waiting for that. diane, thank you so much for coming and explaining it to us. >> you're welcome, susie. >> susie: >> tom: here are the stories in tonight's n.b.r. newswheel: slight gains on wall street. the dow gained nine points, the nasdaq added six and the s&p 500 was up a point. trading volume backed off a bit from yesterday's pace on both the big board and the nasdaq. new jersey and the s.e.c. have agreed to a settlement over fraudulent municipal bond sales. the s.e.c. says the garden state told the bond market it was properly funding pensions, back in the early part of the last decade, while it wasn't. as a result, it sold over $26 billion worth of muni's. new jersey won't have to pay
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anything, but it was ordered to cease and desist from future securities violations. a federal judge has signed off on a settlement between barclays and the u.s. justice department a day after rejecting it. the judge was concerned the bank was getting off too easy. barclays will pay $300 million to avoid prosecution on charges it did half a billion dollars in business with banks in cuba and iran, violating u.s. economic sanctions. >> tom: still ahead, is target on target with its billion- dollar store remodeling strategy? we visit one store before and after the work. >> susie: pessimism is the sentiment when people talk about the u.s. economy these days. some now see a so-called double- dip recession as a real threat. many others believe the more likely scenario is a long-term period of modest growth. so what could that mean for americans? suzanne pratt has the story. >> reporter: you probably know the fable about the tortoise and the hare.
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in the end, slow and steady wins the race. when it comes to the economy, slow growth-- even if it's steady-- is not such a good thing. investment strategist doug roberts predicts we'll probably see annual g.d.p. remain around 2% or 2.5% for as long as eight years. the worst part of that is what it might mean for jobs. >> if we continue to have some type of a free trade environment, with limited barriers, you're going to have persistently high unemployment. this unemployment level of around 7% or 8% is going to become the new normal. >> reporter: unemployment at 8% feels especially bad to a generation of americans that has grown accustomed to something better. those same citizens are more familiar with a robust economy, rather than a tepid one. >> these are the people from an economic basis that are used to regularly going out to dinner, going on vacation, spending what they want to, not really saving that much. it's going to feel worse than
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historically, actually it will probably be. >> reporter: for that reason, expect consumers to pull back on their shopping for more than just one holiday season. and, with less spending, corporate profits are likely to suffer. equity strategist craig peckham says earnings guide stock prices and, if earnings are lackluster, the stock market will show it. so, can stocks still go up in that environment? >> certainly. but, while i would expect the direction would be higher, i think expectations have to be a bit more subdued in terms of the magnitude. consecutive years of 20% to 30% equity gains seem a little bit tough to argue for, given the more modest growth outlook. >> reporter: to be sure, a long period of slow growth could also result in some positives for the u.s. economy. experts predict we'll see consumers paying down more debt, better retirement saving and perhaps less conspicuous consumption. suzanne pratt, "nightly business
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report," new york. >> tom: record-low interest rates have more americans looking to refinance their home loans. mortgage applications rose 13% last week, driven by a 17% surge in re-fi's. that's the highest level for re- fi's in over a year, but it's still lower than the last big boom. that's because credit standards are much higher now than in the past. mortgage bankers association economist jay brinkmann says investors in those mortgages, namely fannie mae, freddie mac and f.h.a., are also tightening their requirements. >> the documentation requirements are much more strenuous, the repeated requests for information, you can get your credit report when you apply, but they're going to ask for some of that same information a month later when it comes time to close the loan and make sure nothing else has changed. >> tom: some lenders are locking in potential borrowers for 90 days to allow enough time to get the paperwork done before closing.
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>> susie: meaggersh gains on the exchanges, but a lot of people are happy to see it is in positive territory. >> tom: two days in a row, the green arrows. let's take a look at tonight's "market focus." >> tom: some stronger numbers from retailers helped propel the major stock averages today. meantime, the biggest stockpile of oil in the past 20 years
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pushed the energy sector lower. we'll start with the energy sector exchange traded fund, down nearly 1%. it's close to its previous low for this month. oil prices dropped to a one- month low after the u.s. energy department found inventories of more than 1.1 billion barrels of oil and fuel. that's the highest since 1990, when the data began to be collected. at its lowest price today, oil hit a six-week low. lower energy prices combined with growing retail earnings for investors. target saw a double-digit earnings increase even as sales were less than anticipated. the bottom line matched expectations, with credit card business and a billion-dollar remodeling effort helping. we'll have more on those store renovations coming up after the "market focus." the company called wall street's financial forecasts for the rest of the year reasonable. shares started the day in negative territory, but ended up 2.5% by the closing bell. other retailers finding buyers included dillards, up 8% on heavy volume. it announced a $250 million stock buyback program.
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kohl's added almost 4%. remember, shares began this week at a new 52-week low. and macy's continued its climb, now at a two-month high. there was weakness in the sector, too. discounter b.j.'s wholesale club hit a double disappointment, on earnings and its outlook. earnings were six cents less than expectations and revenue analysts say b.j.'s may have lost some shoppers to competitor wal-mart's sam's club and its price cuts. adding to that disappointment was b.j.'s cutting its outlook that dropped the stock down to a seven-week low on heavy volume. small-cap apparel retailer citi trends also saw big volume today, falling to an 11-month low. earnings were less than forecast as same-store sales dropped in the latest quarter and margins fell. it also cut its outlook. a trio of earnings after the close were moving their stocks. pet-smart had good results and raised its forecast. the stock added almost 8% to its closing number. two data-storage stocks were lower after the close.
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brocade was down 6% after hours on weaker margins. netapp's results beat the street, but it did not change its guidance. that was seen as a disappointment. shares fell almost 5% after the bell. we got a read on global commodities and construction with deere and company today. deere beat the street by 20 cents, as demand jumped for its farm and construction equipment. however, the increase in equipment sales was less than the company's own forecast from may. its outlook was disappointing too. that hurt shares of d-e, falling almost 2%. the stock remains above its most recent range, that it broke out of to the upside last month. one area of weakness for deere is europe, and that was felt in agco shares. that stock fell more than 3%. agco gets about half its sales from europe and the middle east. an update on the takeover fight
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for potash. b.h.p. billiton will take its almost-$39-billion offer to potash shareholders after potash rejected it. some b.h.p. shareholders aren't sticking around. the stock dropped another 3%, to hit a one-month low. its offering $130 per share for potash, which continues to trade well above that price. and that's tonight's "market focus." >> tom: like a homeowner deciding to renovate a house instead of moving, target is spending over a billion dollars this year to remodel almost a fifth of its stores. we visited one to see what the makeover looks like, and how the company hopes the strategy adds to the bottom line.
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this is the dadeland target store in miami. when shoppers walked in the front door this spring, this is what they saw. after a store-wide makeover, here's how the main aisle-- what target calls the racetrack-- looks today. john griffith runs property development for the retailer. >> as she stands there at that first intersection point, she'll look down that long aisle and she will see a whole new expression in fresh food. that's a big wow for her. >> tom: target refers to its customers as "she" because its core customers are women. the remodeling costs about $3 million per store. on average, the revamped stores are showing increased customer traffic and a 6% jump in sales. breaking down the numbers, an average target did just over $40 million in sales a year before a remodeling. that 6% increase adds an extra $2.4 million of annual sales. after costs are figured in, a newly remodeled store is expected to bring in an extra $168,000 of profits its first year. to bring in those profits,
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changes include a much bigger grocery department... electronics... and a bigger shoe section. richard jones watches over seven stores in miami and has high hopes for dadeland. >> this was our highest volume store in our group, and one of the highest inside of the entire region. as we've added all these extra experiences for the guest, we expect it to grow even faster and further than it is today. >> tom: before the remodeling effort, this target store saw an average customer receipt of about $50 per visit. they expect that to be going up, and it may be already. just a couple of weeks after the remodeling reopening, the target store's already seen same-store sales storewide see a double- digit increase. grocery sales are up 117% in the month of august so far, compared to a year ago. of course, it may be more of a peaches and banana comparison, so to speak, considering that the grocery space is much larger now compared to last year. analysts say target has to go beyond fresh fruit and more groceries, though. justin wartell is director of
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brand strategy at interbrand. >> the banana at target and the banana at wal-mart are essentially the same bananas. so, how do they find either new or unique products to compliment the core offer? or how do they find unique ways to deliver it to the customers who are walking through the door? >> tom: target's hope is, by offering more food, which comes with lower profit margins, shoppers will stay in stores longer, filling up their carts with higher-margin items. so far, customers seem impressed. >> i think it's very, very nice. the hardest thing is not being able to find what i used to be able to find because... i used to know where everything is. now i have to find my coolers or whatever it might be, but i think the renovation is very nice. >> its an easy to get in, easy to get out. it has most everything that i need, that i would come here and almost expect to find everything now. >> tom: the project began as a test in philadelphia last year. this year, it's concentrated on key urban markets, but target
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expects about another 340 stores will be redone next year, costing another $1 billion or so. >> susie: more retailers ring up quarterly results tomorrow. we'll hear from aeropostale, buckle, footlocker, gap, ross stores and sears-- along with dell and hewlett packard. and speaking of h.p., we look at the leading contenders to fill the top job at the world's largest technology company. >> susie: six companies will pay $10 million as part of a settlement to repay online shoppers. new york's attorney general says half of the money will go to hundreds of thousands of consumers who were tricked into joining discount clubs that carried hidden fees. the companies involved in the settlement are marketing firm affinion group, and retailers classmates online, f.t.d., avis budget group, gamestop and avon products. consumers were duped by cash- back offers, with fees often hidden in the fine print.
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>> tom: the american dream of homeownership is being delayed, or avoided altogether. a new survey finds 72% of renters plan to buy eventually, but 27% say they have no plans of buying, ever. 2,000 americans were polled by real estate search site trulia.com. many renters say they can't save enough money for a down payment, or they're putting off buying a new house until they get a new job.
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>> susie: one of the goals of the new health care law is to help people with pre-existing conditions afford insurance. but, it'll be nearly four years before the law is fully in effect, so what can a small business owner without insurance do until then? in tonight's "money profiles" segment, benno schmidt meets a businesswoman whose situation is currently on ice. >> reporter: prepping for the day's work isn't easy for 61- year-old year old angela romero, but it's what she has to do for her job-- doling out ices to the residents of miami's little havana neighborhood. angela and her husband nelson own the business, and do everything from keeping the merchandise cold to firing up an ancient duo of trucks every day. as for staying cool in the brutal miami heat? >> i got a spray, i put in the
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water, and put in this and... cold water. >> reporter: the ten-hour days on the road have taken a heavy physical toll on this grandmother of 17. the result? worsening diabetes and high blood pressure-- and big jumps in her medical bills. angela used to have a fairly good individual health insurance policy, but when she turned 61, her premium skyrocketed to $367 a month, and she had to drop it. now she has to pay for her own medications, and she has no protection against big medical expenses. daughter-in-law oona romero says insurance companies don't want to sell to angela because of her medical problems. >> they call them preexisting conditions, they have specific codes for them, and they just send you a letter saying "we're sorry, we can not insure you because of condition 001 002, thank you very much for applying." >> reporter: the romeros are typical of many who could benefit from the new health care reform law.
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when it's fully implemented, insurers won't be able to turn away or cancel people like her, with pre-existing conditions. but that won't happen until 2014. meanwhile, the romeros' life savings are melting away. >> the account started at $15,000, and now its at $200 as of last month. that is her entire life savings. that's what they were planning on using for retirement. >> reporter: so for now, what can people like angela do to reduce their medical expenses? if they don't have health insurance, karyn schwartz of the kaiser family foundation advises applying to be part of a pre- existing condition insurance pool. these state pools will soon offer subsidized policies for high-risk persons. >> it's a little too soon to tell what the premiums are, or how many people will end up signing up. but these health plans will allow people with pre-existing
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conditions to buy health insurance without being charged more because of their pre- existing condition, as long as they've been uninsured for six months. >> reporter: the high-risk pools are among the first parts of health care reform act to take effect. but how do you find out about what other changes are coming in health care and who will benefit? that's where the website healthcare.gov can really help. besides a timetable on the new law, it also gives information about health care programs in each state. small businesses may also get some interim help from the i.r.s. >> small businesses with 25 or less employees will receive huge tax benefits for the business portion of their health insurance premiums that they pay. >> reporter: so as she plies miami's roads looking for customers young and old, angela romero can hope. better days may be ahead for people like her who have pre- existing health conditions and don't yet qualify for medicare. benno schmidt, "nightly business report," miami.
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>> tom: that's "nightly business report" for wednesday, august 18. i'm tom hudson. good night everyone, and good night to you too susie. >> susie: good night tom. i'm susie gharib. good night everyone, we hope to see all of you again tomorrow night. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt captioned by media access group at wgbh
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access.wgbh.org >> more information about investing is available in "nightly business report's" video "how wall street works". to order this dvd, call 1-800- play-pbs or visit online at shoppbs.org. >> be more. pbs.
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